Russia fight against high grain prices

Russian authorities have started full scale intervention in the domestic grain market to curb prices and control export.

The Ministry of Agriculture will contribute up to 130,000 tonnes of grain per week to market intervention. Meanwhile, 60,000 tonnes has already been sold during the first days of the week. The 4th grade grain was sold at 7,850 rubles ($250) per tonne and the 3rd grade at 7,720 rubles ($246).

“The state intervention is already having an impact on the market. Grain is traded successfully; with intervention prices close to the market, but still lower” said Aleksandr Korbut, Vice-president of Russian grain union.

At the beginning of the session there were 71 participants in the trades, now there’re 124, according to Korbut. “It’s a positive effect as processors are interested in buying grain for lower prices and delivering production at lower costs. That boosts competition in the market”, he explained.

The state intervention fund currently holds about 4.8 million tonnes of grain. Selling up to 130,000 tonnes of grain per week, the fund will keep 75% of its reserves by 2013. However, Russian flour millers’ union said the country could face a grain shortage by early 2013 as the authorities have started intervention too early. If so, Russia would have to import grain from Kazakhstan and Germany, the said. But experts argue the state has enough reserves to avoid a shortfall.

“The average consumption of grain in Russia is about 71 million tonnes. This year’s harvest is 70 million tonnes. With exports totaling 10-14 million tones, it could lead to a shortage in the domestic market. But the country has reserves of 20 million tonnes, that is enough to compensate for the exports”said experts

In October Minister of Economy Development Andrey Belousov said that “it's quite possible the government will decide to restrict grain exports,” if the prices on the domestic market continue to soar. However Deputy PM Arkady Dvorkovich stressed that Russia doesn’t plan to impose any export limitations at the moment.